Currently, the airline industry is in the process of technological transition to improve its position in the value chain since, at this moment, two systems are operating in parallel: the traditional system and another modern, dynamic, and adaptable system that will allow better future for the industry, stated the consulting firm OAG.
The system runs on modern cloud-native software solutions that can be easily integrated with other business applications so airlines can gain real-time insights into customer behaviour or make decisions based on data-driven analytics results.
Furthermore, this new system is driven by two underlying trends that are closely intertwined: new technologies and changing customer needs.
New technologies allow airlines to offer products in more flexible ways. One example is NDC (New Distribution Capability), which provides more individualized inventory packaging through indirect channels.
But there are many more instances, such as modern software solutions that leverage machine learning and enable better techniques to predict and meet traveller demand.
A company like Hopper, for example, analyzes billions of historical price points associated with flights to predict future air travel ticket prices accurately. This company surpasses the forecasting capabilities of many airlines, which continue to use classic ways of modelling passenger demand.
The consulting firm assures that today’s travellers are easily used to buying everything they need on Amazon. The airline retail experience seems outdated and needs to change.
Customers expect to purchase airline tickets and related services with the same convenience they find on other e-commerce platforms. This puts pressure on airlines to enable better customer experiences.
Together, these trends have led to a rapidly growing ecosystem of Travel Tech companies, many startups, to own the end consumer through customer-facing mobile applications.
Most Travel Tech players leverage digital technologies, such as machine learning and artificial intelligence, to serve customers in ways the legacy system does not allow. And more importantly, these companies can drive the entire airline industry towards a modern, dynamic and customer-friendly model in almost exponential ways.
Furthermore, the system transition also affects how physical aircraft are propelled through the air, such as sustainable aviation fuel (SAF). This technology is increasingly replacing conventional jet fuel amid growing concerns about sustainability among travellers (and the public).
As a whole, the aviation industry is naturally risk-averse. Given this, airlines are hesitant to abandon the traditional system completely. This is mainly due to the misconception that such a system provides greater stability since it has existed for a long time.
The airline industry has long been a notoriously low-margin business, so that’s unlikely to change anytime soon, even though U.S. airlines expect to generate a record profit of $1 per passenger in 2023. So, airlines tend to stay away from more radical transformation efforts. “For such a significant change to occur, initial investments are required, which do not pay off immediately.”
As 2023 progresses, it becomes evident that the airline industry can no longer wait to change things. Many of the most recent IT outrages support the idea that the perceived better stability of the traditional system is a significant misconception.
The benefits that come with modern systems will lead not only to better-performing operations but also to more satisfied customers.